Cash-strapped Kumho Asiana Group said Monday that it will put its flagship Asiana Airlines Inc. up for sale to secure a fresh loan from creditor banks, sending shares in the carrier sharply higher.
The group's decision to sell Asiana Airlines came after creditors, led by the state-run Korea Development Bank (KDB), and the Financial Services Commission (FSC) rejected its earlier self-rescue plan last week, demanding more concrete and bolder action.
Creditors and the financial regulator called the plan "insufficient" to restore market trust in the airline-to-petrochemical conglomerate as it lacked any plans to sell the founding family's personal assets and to issue shares to raise funds.
In a new restructuring plan, the group said it will immediately start the process of selling Asiana Airlines. And it provided an additional 4.8 percent stake in Kumho Business to the creditors as collateral for new loans.
Currently, creditors hold a 42.7 percent stake in Kumho Business, an express bus operator, as collateral for the loans that have been extended to the group, along with a 42.7 percent stake in Kumho Tire Co.
The group also said it will scale down the airline's fleet, suspend non-profitable routes and improve employees' productivity, while strongly urging the creditors to extend a fresh loan worth 500 billion won (US$440 million) to Asiana Airlines.
Creditors held a meeting Monday evening to review the revised restructuring measures before they decide on whether or not to extend a helping hand to the debt-laden carrier.
Asiana Airlines owes financial institutions 3.2 trillion won in short-term obligations, with some 1.2 trillion won of loans maturing this year.
"Creditors delivered a positive analysis on the revised programs, and the (main creditor) KDB will consult with eight other creditors to come up with measures to put Asiana Airlines back on track as quickly as possible," the KDB said in a statement.
Early on Monday, FSC Chairman Choi Jong-ku expected creditors to accept the new self-help plan, calling it "very positive."
"It would take several months for the group to complete the proposed sale of Asiana Airlines even if the process goes smoothly. It may change depending on market conditions," Choi told reporters on the sidelines of a financial seminar in Seoul.
Shares in Asiana Airlines soared by the daily limit of 30 percent to 7,280 won, their highest in more than three years, on the news. The broader KOSPI rose 0.42 percent.
The 33.47 percent stake is valued at some 500 billion won based on Monday's closing price. The acquisition price may reach 1 trillion won if the management premium is taken into account, analysts said.
The country's major conglomerates such as SK Group, Hanwha Group, CJ Group and Aekyung Group reportedly have an interest in the carrier, although they denied the media reports.
Once it is sold to a new parent and becomes debt-free, Asiana Airlines will be able to reemerge as a financially healthy company, a KDB official said.
As for Kumho Asiana, the sale of Asiana Airlines will help improve the group's financial health as the proceeds can be used to repay some of the group's debt and cover financial costs, which reached over 160 billion won last year, KB Securities Co. analyst Kang Seong-jin said.
"In addition to the sale of the carrier, a possible rights issue and other restructuring measures will help reduce interest costs and other expenses at the group," Kang said.
The restructuring plan follows Kumho Asiana Chairman Park Sam-koo's resignation last month.
Park stepped down as chief executive of Asiana Airlines after the company failed to win auditors' approval for its 2018 financial report last month. The company's shares nosedived, though its revised statement was accepted.
His resignation came after Choi and creditors also voiced opposition to the founding family's plan to keep its control over Asiana Airlines, the country's second-biggest airline after Korean Air Lines Co.
In 2018, the KDB and Asiana Airlines signed a deal that required the carrier to secure liquidity through sales of non-core assets and the issuance of convertible and perpetual bonds.
Last year, Asiana Airlines swung to a net loss of 10.4 billion won from a net profit of 248 billion won a year earlier due to currency-related losses and increased jet fuel costs. (Yonhap)
Kim Sang-wee firstname.lastname@example.org